Morning Market Update

Flat as Corporate Data is Being Met By Euro Concerns

US stocks are little changed as some favorable data from the equity front is being offset by resurfacing euro-area debt concerns as eurozone officials have agreed that an adjustment to the terms of Greece’s bailout package is needed, and Ireland is reportedly looking for new terms. Meanwhile, the economic front is quiet today as there are no major releases scheduled, but some key data is slated for the second-half of the week. Treasuries are mostly lower in early action. In equity news, Dow member McDonald’s Corp posted strong same-store sales in April, while Tyson Foods Inc issued an upbeat outlook. In M&A news, Hertz Global Holdings revised its bid to acquire Dollar Thrifty Automotive Group Inc. Overseas, Asia was mixed, while financials are leading Europe lower.

As of 8:52 a.m. ET, the June S&P 500 Index Globex future is 1 point below fair value, the Nasdaq 100 Index is at fair value, and the DJIA is 7 points below fair value. WTI crude oil is $2.23 higher at $99.41 per barrel, and the Bloomberg gold spot price is up $8.13 at $1,503.70 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.1% to 74.77.

Dow member McDonald’s Corp. (MCD $79) reported April global same-store sales growth—sales at stores open at least thirteen months—of 6.0% year-over-year (y/y), with US sales rising 4.0%, while sales out of its Europe, and Asia/Pacific, Middle East and Africa segments increased 6.5%.

Tyson Foods Inc. (TSN $19) reported fiscal 2Q earnings of $0.42 per share, just below the $0.43 consensus estimate of analysts surveyed by Reuters, but revenues rose 15.7% y/y to $8.0 billion, topping the $7.5 billion that the Street had expected. The meat producer also issued full-year revenue guidance that was above analysts’ estimates, mostly due to price increases associated with rising raw material costs.

In M&A news, Hertz Global Holdings Inc. (HTZ $17) announced that it has increased its previously rejected offer to acquire Dollar Thrifty Automotive Group Inc. (DTG $70) to $72 per share in cash and stock, or about $2.36 billion. The previous bid was for $50.99 per share and is at a 24% premium to the offer from rival Avis Budget Group Inc. (CAR $18) to acquire DTG.

Slow start to economic calendar but data heats up in second half of the week

Treasuries are mostly lower in morning action as there are no major economic reports scheduled for today, with the yield on the 2-year note unchanged at 0.55%, while the yield on the 10-year note is 2 bps higher at 3.16%, and the 30-year bond yield is gaining 3 bps to 4.31%.

The bulk of the week’s US economic reports will come in the latter-half of week, highlighted by Thursday’s advance retail sales, forecasted to rise 0.6% month-over-month (m/m) in April, after gaining 0.4% in March, while sales ex-autos are also estimated to grow 0.6%, after increasing 0.8% the prior month. Same-store sales results reported by retailers were mixed, despite the positive effect of the Easter shift. The retail sales report includes spending at supermarkets and gas stations.

Inflation readings will also be in focus, starting with Thursday’s Producer Price Index (PPI), expected to show prices at the wholesale level rose 0.6% m/m in April, while the core rate, which excludes food and energy, is expected to increase 0.2%. The release precedes Friday’s Consumer Price Index (CPI) report, forecasted to show a 0.4% m/m increase, while ex-food and energy it is expected to rise 0.2%.

Other releases on this week’s US economic calendar include: the NFIB Small Business Optimism Index, import prices, wholesale inventories, MBA Mortgage Applications, the trade balance, initial jobless claims, business inventories, and the preliminary University of Michigan Consumer Sentiment Index reading for May.

Euro debt concerns pressuring Europe

The equity markets in Europe are under pressure in afternoon action, led by weakness in financials as eurozone debt worries are resurfacing and shares of HSBC Holdings Plc. (HBC $53) are down solidly after the UK bank reported smaller-than-expected earnings. The earnings were impacted by higher costs and the company’s CEO said it could take up to three years to get the bank’s cost-to-income ratio down to its target rate. Meanwhile, the euro-area debt crisis is garnering the most uneasiness after a meeting of top eurozone finance ministers met and agreed that recently bailed out Greece would need new adjustments to its bailout package. The debt concerns were exacerbated by reports that Ireland said any concessions given to Greece should mean better terms for its bailout package, per Reuters.

On the economic front, Germany’s trade surplus surprisingly widened in March, supported by a sharp increase in exports, while UK home prices unexpectedly fell in April and a separate read on eurozone investor confidence deteriorated by a larger amount than expected.

The UK FTSE 100 Index is down 0.8%, France’s CAC-40 Index is declining 1.3%, and Germany’s DAX Index is dropping 1.2%. Elsewhere, Greece’s Athex Composite Index is decreasing 1.3% while Portugal’s PSI 20 Index is up 1.0%, and Ireland’s Irish Overall Index is gaining 0.2%.

Asia mixed ahead of Chinese data

Stocks in Asia finished mixed, with the equity markets in China moving higher ahead of some key April economic data set to be released this week, beginning with tomorrow’s trade report and headlined by Wednesday’s consumer and producer price figures, expected to show slight decelerations to 5.2% and 7.0%, respectively. Other reports out of China this week include industrial production, retail sales, and fixed asset investment. The Hong Kong Hang Seng Index rose 0.8% and the Shanghai Composite Index increased 0.3%. However, stocks in Japan finished lower despite Friday’s favorable labor report, as the Nikkei 225 Index declined 0.7%, with shares of Chubu Electric Power Co. (CHUEF $15) falling sharply after agreeing to Prime Minister Kan’s request to shut down a nuclear facility that it operates until it can be better protected against a natural disaster like the one that hit in March. Also, South Korea’s Kospi Index closed 0.4% lower in cautious trading ahead the nation’s central bank monetary policy meeting later this week, in which it is expected to increase its benchmark interest rate from 3.00% to 3.25%. Finally, a rebound in commodity prices helped Australia’s S&P/ASX 200 Index move 0.3% to the upside, despite a report that showed the nation’s business confidence deteriorated, while India’s BSE Sensex 30 Index closed 0.1% higher.